Surgeon → VC

Going into it, I didn't think I was going to be a McKinsey lifer — it was very pragmatic for me. I wanted something that would give me a ton of experience in a relatively short space of time, and a platform to go on and do something else. I wasn't quite sure what that was at that point, but that was the feeling.

It's really hard, as a doctor, getting into management consulting. You learn a certain way to think at medical school — it's dogma, rote learning, pathways and protocols. When you go into a place like McKinsey, it's all about making assumptions, having hypotheses and identifying evidence to back those hypotheses up. So it's actually a much more scientific approach in many ways, just sped up. It's really tough to change that way of thinking and of solving problems. They provide a ton of support to help you do that, but it took at least six months, potentially longer, before I started feeling like I was really operating at an effective level.

The other thing is that when you're a doctor you're faced with life-and-death decisions on a regular basis. Shifting to being a management consultant — it's an important job, but if you've been operating on people and then six months later you're creating PowerPoint slides at four in the morning, you start to think, hold on a second, is this the right thing to do? How is what I'm doing anywhere near as impactful as what I was doing before? That takes a while to get your head around. You work incredibly hard — particularly in the US, I was travelling all over the country, getting up towards 35 states over a couple of years. It's exhausting. But you learn a huge amount and you work with incredibly motivated, incredibly bright people.

What was really interesting was when I was at St George's and I had management consulting firms, including McKinsey, coming in to work with us. Being on the other side of it — being the client, essentially being managed by different groups of consultants — you realise how you don't always have as much empathy as you should for the client when you're the one consulting, because it's pretty stressful, and often they're brought in when significant change is happening in an organisation. All in all, it was a great experience. It's not for everybody, and it's certainly one way to learn quickly — but now you have others. There are lots of early-stage companies where you can get a similar fire-hose experience, which is great.

Yeah, I think that's one of the great things about it — they foster that culture, because they're a multinational business. You have consultants based out of the London office being transplanted to Tokyo to do a study, so everyone has to speak a similar language and have a similar ethos in how they approach things. And it's fascinating, because in many ways it's so alien to medicine. Certainly back when I was practising, the hierarchy was there, which is largely absent at McKinsey — or at least less visible. Just the concept of calling the partner on your case by their first name.

When it comes to patient safety, there are some tragic examples of when that hasn't happened in medicine and mistakes have been made because more junior staff felt unable to challenge things being done by more senior staff. There's a lot either side can learn, but that's one of the things clinical practice can learn from a firm like McKinsey — that, and a level of transparency that probably doesn't exist.

One of the things I felt moving to the private sector, away from the NHS, was how you're looked after in a much more holistic way — around training, development, other aspects. It's been a mission of mine since I got into investing: focusing on the workforce within the NHS and health systems more generally, because they've often been forgotten. Life has got harder and harder for doctors and nurses — a lot of the perks that used to exist in clinical practice have fallen away with reduced funding. So I get particularly excited about companies looking to solve some of those problems, especially health IT and digital health solutions that make the lives of the clinical and non-clinical workforce better — whether that's a byproduct of what they're building or a direct objective of it.

Sure. At the most basic level, venture capital is a financial asset class. It's a type of private equity — investment that's not provided by the public markets, but by private individuals or entities. We're looking to invest in companies that have the potential to be very high-growth, to operate in very large markets, and on that basis deliver a financial return for the investors in a fund — who are called limited partners. These limited partners often have investments across both public and private markets. That's the traditional model.

When you get into healthcare, you're still there to deliver a financial return ultimately, but there's this concept of a double bottom line — you're also looking to provide impact. It's probably true to say — although it'll be interesting to see how the next decade goes — that if you want to make the big bucks, you probably shouldn't be investing in healthcare; you should be investing in Silicon Valley and pure tech software plays. But investing in things that are going to have a really positive impact on society, and on the way healthcare is delivered, is very important to me. And I believe you can identify opportunities where you have impact and also build big businesses that generate a return.

Investors in venture capital typically invest pretty early. A company may have raised a bit of capital from friends and family, or from angel investors — individuals who have money to invest. Then a VC comes along at a certain stage and says, we're going to invest a chunk more, and we're going to work with you to help this business get to the next stage. We often take a board seat and work closely with the founding team across the board — how they hire, how they think about going to market, product development, the nuts and bolts of scaling. The capital we provide gives them the cash runway to do that. The focus is very much on aligning on a set of milestones the company wants to achieve in a time-limited period — say 24 months — helping them get there, and then focusing on the next step, which often involves raising more money from other investors.

The landscape has changed a lot. When I started doing this back in 2016, there weren't many standalone health tech or digital health funds. You had your life-sciences funds investing in biotech, and your pure tech funds — a couple dabbled in the area, but not many. So we were one of the earliest funds focused on it, certainly in the UK; it was a more established environment in the US. Since then, and particularly this year, we've seen real growth in investment going into health tech in both Europe and the US, and a number of specialist healthcare funds have launched, which is fantastic. The thesis is essentially that you need a level of insight, understanding and expertise to add substantive value around a healthcare company — because of the nature of the customer, and often the clinical and scientific aspects involved. Plenty of pure tech funds have done very well investing in healthcare, but what you'll increasingly see is a level of specialisation.

Certainly not in healthcare. The last time I saw the data, across VC in general the typical time to an exit — to an IPO, going public — was around seven years. That's across the asset class, and it's going to be longer in healthcare. It's a long-term game. You're investing early, and particularly in healthcare you're expecting it to take time for a company to get to the point where it's cashflow positive, able to scale significantly, and at a stage where there's an acquisition opportunity or a chance to go public.

That was a big adjustment for me. Coming from medicine or management consulting, there's not a whole lot of feedback on whether you're doing a good job. For the large majority of the investments we've made, I don't know yet whether they're going to succeed. So you have to focus on process, on ensuring you've got a really effective process in place, and then on interim signals that things are progressing well. You'll see lots of song and dance about large fundraises being done — that's often celebrated, some might say over-celebrated, but for both a company and its investors it's a level of validation that what you're doing is progressing. There's also a more obvious form of validation: how you're doing with customers, and whether you're growing revenues significantly.

The key thing about investing at this stage is that it's incredibly high-risk. Most of the companies — potentially 70% — are not going to succeed. You'll lose your money on those. So you're betting on the one, two, three companies that can deliver a really significant outcome. All the data shows this concept of a power law: you don't have a normal distribution of outcomes in venture. Again and again, the most successful funds have five or six failures, two or three companies that do okay, and then one single company that delivers an outsized 100x, even 500x return. It's the same across investors — the top 5 to 10% of funds deliver 90% of the returns. It's a pretty binary business. So when you look at a company, you've always got to be thinking about the potential down the line: is this company operating in a market, and does it have the kind of team, that can deliver a really significant business?

I've found it very tough, coming from careers — particularly management consulting — where you get relentless feedback. That's been one of the most challenging things to overcome as an investor. And there's a lot on social media, and more generally, about funds and companies that are doing really well, so it's challenging to shut out some of that noise. You just have to focus on developing a process that's strong and having faith in it. That really looks like having a very strong deal-flow engine — constantly seeing the best companies, and not missing out on high-potential ones.

Of course. In the same way as in sales, your success is only as good as what's coming in at the top of the funnel. You want a volume and a quality of companies that you're seeing on a regular basis, so you can be confident that within that large volume there'll be some very strong companies and founders. Deal flow is crudely outbound and inbound. Outbound is reaching out to companies or other investors and saying, let's have a discussion. Inbound is companies getting in touch directly, or other means of generating awareness so that deals come to you. It takes time to build up and it's a constant process to improve, but it's a core part of the business — because there's nothing worse than not seeing a company you would have wanted to invest in.

The next stage is due diligence — evaluating the company and making the right decision on whether to invest. There are different levels of depth, but it has to be a consistent process so you're confident you're making the best decision with the information you have. That can be a back-and-forth discussion with a company over time, speaking to experts in the field to get their perspectives, speaking to the company's customers, and then the deeper financial and legal due diligence.

One thing I've learned is that it's key to look back on the process in retrospect — for companies you invested in, but also ones you decided not to. Analyse the decisions you made at different points and see how you can improve. There's a lot of discussion on the investing side about the concepts of luck and skill. Thinking in Bets, for example, talks about how you can have a bad process and a good outcome — that's dumb luck, and over time you'll lose more than you win. So it's about really focusing on the process, expecting that more often than not, particularly in venture, you're going to fail — but over time you'll win more than you otherwise would, based on consistent refinement of that process.

I think so, but that's tough to do right at the gestation of a business. We've invested when it's been a group of founders and a PowerPoint deck, and even at Series A there's still a lot that can go wrong. So you have to develop criteria that are proxies for what the potential can be. That's why investors are so fanatical about how they think about founders — identifying really high-potential founders — and about markets: really large markets. If you get those two things right, the product to some extent is always going to iterate and change, so you have to expect adaptations. But if you've fundamentally got a very strong founding team and a large market with tailwinds and real opportunity, that gives you a good shot at success.

That said, there are plenty of funds — historically within healthcare — with a slightly different MO. They'll say, we're not going for those shoot-the-lights-out, multi-billion-dollar exits; we want confidence and consistency in delivering slightly smaller ones — say 100 to 300 million dollars or pounds. That's fine, it's another way to do it, and particularly in areas like medtech you can develop a very strong playbook and keep supporting founders who start new companies. So there's a philosophical choice there. The great thing about VC in general is there's no one right way to do it. But the data probably does suggest that the funds focused on those really outsized winners are the ones that deliver the highest returns over time.

It's a highly uncertain business, and working with uncertainty generally means thinking probabilistically about the likelihood of an outcome and then the magnitude of that outcome. If you have a combination where, even if a successful outcome is unlikely, the magnitude is really high, the expected value will probably supersede a more consistent, safer bet.

That data does exist. There's been a lot of research, going a long way back, on investing in early-stage companies, and it does point to a combination of effective teams working in large, high-growth markets, delivering a return based on momentum more than anything. Most funds would go along with that. But there's a factor around theory and practice: the best companies are ultimately going to be quite scary decisions at the beginning, because often they'll look quite irrational, and there may not even be a market — for the really big outcomes, often there's no obvious market; they're creating it.

It's often said that the biggest companies looked a bit stupid at the beginning, and people didn't feel they were necessary. Take Airbnb — a classic example. Fund after fund passed on it, presumably because at the time it was just that much of a non-obvious bet. The thing about investing is that if you're right but everyone else is also right — if you're investing in something and everyone else is choosing to do the same — there's no arbitrage opportunity; the price just increases. That's the efficient market hypothesis, to some extent. So it's not possible to make consistently significant returns there, because the valuation you have to invest at will be too high to get a really significant multiple. It's the classic idea that you want to be right where everyone else is wrong — you want to invest in something no one else believes will work, because then you can invest at a price that makes sense for you as a fund. That's hard to do, because you're sticking your neck out. A lot of people look at you and say, what the hell is that person doing? You look like a genius if it works out, and not very clever if it doesn't — particularly if it happens consistently.

The other thing is just pure luck. VC investors can have some impact on how a company develops — they can help founders make the right calls, hire the right people, prepare the right go-to-market strategy — but fundamentally 75, 80, 90% of it is the team and the market they're operating in. So if you can pitch yourself to the right founding team, you're going to be lucky and privileged to be doing that. Often you just have to get out of the way and let them do their magic.

You could invest in Facebook with your very first investment, and then everyone says you're a spectacular investor, how insightful you were — and on that basis a virtuous feedback loop develops: more high-potential companies seek you out, more investors see you as the guru who foresaw it, and you consistently see the best companies. There's a lot of luck involved. I remember speaking to an investor a few years back who invested in the Series A of one of our portfolio companies, Luma Health. She was talking about how she'd got to know the founding team at Lyft, back when they had a slightly different business model, and she'd had the opportunity to invest — potentially to get 25% of Lyft — but made the decision not to, and has been kicking herself ever since. That's the reality of the job. There's skill, and you can only focus on the process, but equally there's a huge amount of luck, of being in the right place at the right time, and of getting out of the way.

You'll have to judge me by the return I deliver on the portfolio in five years' time. What can I say? In general, one seeks to gain some level of information asymmetry. One of the beauties of being linked to InHealth is that they're a healthcare services provider, so for a large portion of the companies we look at, we can go and speak to colleagues on the operational side and ask, what do you think of this? Would you use it? What are the issues with it? That's one example of getting some advantage over other investors in your field — and that's before you think about how you can then help those companies once they're in the portfolio.

Beyond that, no one person is going to have a consistent edge over everyone else. Ultimately it comes down to building great teams with a diverse set of experiences, perspectives and expertise, so that on that basis you reach the right decisions. There's always going to be reversion to the mean. There are particular areas where you can set up a thesis, go really deep and start to develop some informational advantage. And there are technical ways to do it — less on the decision-making side, more on the deal-flow side. At InHealth we're exploring how we can use data and develop algorithms to more effectively surface the highest-potential companies. So there are different ways, but ultimately you have to accept it's a combination of factors, and it takes a level of humility — and it certainly teaches you humility — about how you identify and then work with the best companies.

There are probably three aspects. The first is really thinking deeply about why you're doing this. There are plenty of ways to have impact and plenty of ways to make a lot of money in life, and starting a company is one of the more challenging ones. It's incredibly hard, it takes time, and there are huge ups and downs — particularly with a venture-scale business, where the return expectation is really significant and the pressure comes with it. So it's very much about focusing on the why to begin with.

The second thing — and we talk to founders a lot about this in the UK — is thinking globally when you're trying to solve a problem. Coming back to that large-market point: in general, our view is that the UK can't sustain a venture-scale return within healthcare. You have to think about how your value proposition resonates in other systems. You can start in the UK, but ultimately you're going to have to go international.

The third is how you build your team, and there are two aspects to that. The technical: can you partner with someone with strong technical capabilities, so you can build and iterate rapidly on your software? And the commercial. On the non-healthcare side, the ethos around software is product-first, and that's hugely important in healthcare too — building great products for patients, doctors and nurses. But you can't do that alone and expect to grow and sell. You have to combine it with a really effective go-to-market and commercial strategy. That's often forgotten, because everyone over-indexes on the product they're building and the problem they're solving, but forgets that on the customer side they've often got five, ten, fifteen, twenty different vendors trying to sell them a product, and only a very small portion of their week to think about investing in new digital solutions. So being really strong on the commercial side is a vital part of building a business — doing that early, even if it's a really esoteric, scientific business. You've got to think early about whether you'll actually be able to sell this once it's developed.

As I look back on my career, there's some cohesive thread to it, but at the time — like most things in life — I didn't really know where I was going. The one thing I consistently did, particularly when I was young, was to commit. I recognised that the opportunity cost was in not making moves, rather than staying with the status quo. There comes a point where you have kids and a mortgage and have to be more circumspect, but when you're young it's all about getting as much experience as you can, whether within medicine or outside it. Those resources are there now for people who want to try and experiment, in a way they weren't even ten years ago.

The other one is a bit of a cliché, but it's about having a growth mindset and consistently learning — recognising how much you have to learn, and how important it is to keep the mindset of someone who's developing and trying to better themselves. For me, a big part of that is reading. I try to spend a good chunk of time reading, and not necessarily about my core focus — reading more broadly, taking lessons from other areas of expertise, fiction and non-fiction. It's something I try to make time for, even though it doesn't always feel like the most important thing to prioritise day to day.